The dynamic impact of government expenditure in education on economic growth

The focal aim of this study is to examine the validation of education-led economic growth hypothesis in Malaysia under the recovery period following the 2008 world economic crisis. Specifically, this study implemented the augmented Cobb-Douglas model in order to observe the dynamic relationship betw...

Full description

Bibliographic Details
Published in:International Journal of Business and Society
Main Author: Rambeli N.; Marikan D.A.A.; Podivinsky J.M.; Amiruddin R.; Ismail I.
Format: Article
Language:English
Published: Universiti Malaysia Sarawak 2021
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85121416894&doi=10.33736%2fijbs.4318.2021&partnerID=40&md5=6e8aec238c96ac35593992934c76ccd4
id 2-s2.0-85121416894
spelling 2-s2.0-85121416894
Rambeli N.; Marikan D.A.A.; Podivinsky J.M.; Amiruddin R.; Ismail I.
The dynamic impact of government expenditure in education on economic growth
2021
International Journal of Business and Society
22
3
10.33736/ijbs.4318.2021
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85121416894&doi=10.33736%2fijbs.4318.2021&partnerID=40&md5=6e8aec238c96ac35593992934c76ccd4
The focal aim of this study is to examine the validation of education-led economic growth hypothesis in Malaysia under the recovery period following the 2008 world economic crisis. Specifically, this study implemented the augmented Cobb-Douglas model in order to observe the dynamic relationship between selected variables including, industrial production index, gross fixed capital formation, employment, government spending on education and broad money supply. This study adopted the Vector Error Correction Model (VECM) in analysing the dynamic impact between variables and generally supports the education-led growth hypothesis in the short and long run. Specifically the study corroborates the bidirectional causality between education spending and economic growth, and vice versa, in the short run. The result also reveals that long-run equilibrium relationship exists between government expenditure in education and economic growth in Malaysia during post-crisis recovery regime. The education-led growth hypothesis can thus be inferred for the economy following crisis. The government should thus be advised that increasing education sector spending should increase post-crisis economic growth in both the short and long run. This is further strengthened by Granger causality test result which suggests unidirectional causality that runs from financial variable to economic growth. It is accordingly suggested that financial variable is a determinant of government spending on education in the aftermath of the economic crisis. Additionally, the study also supports the role of capital and employment on economic growth in the long term. By implication, the study suggests that financial planning as related to national education policies must be carefully and meticulously crafted, to ensure future success. This is linked to the investment in human capital which includes education expenditure at different levels that is essentially important to national long-term planning. The specific financial planning for human capital development is therefore very important to ensure the expenditure incurred contributes to sustainable economic development in Malaysia in the long term. © 2021, Universiti Malaysia Sarawak. All rights reserved.
Universiti Malaysia Sarawak
15116670
English
Article
All Open Access; Gold Open Access
author Rambeli N.; Marikan D.A.A.; Podivinsky J.M.; Amiruddin R.; Ismail I.
spellingShingle Rambeli N.; Marikan D.A.A.; Podivinsky J.M.; Amiruddin R.; Ismail I.
The dynamic impact of government expenditure in education on economic growth
author_facet Rambeli N.; Marikan D.A.A.; Podivinsky J.M.; Amiruddin R.; Ismail I.
author_sort Rambeli N.; Marikan D.A.A.; Podivinsky J.M.; Amiruddin R.; Ismail I.
title The dynamic impact of government expenditure in education on economic growth
title_short The dynamic impact of government expenditure in education on economic growth
title_full The dynamic impact of government expenditure in education on economic growth
title_fullStr The dynamic impact of government expenditure in education on economic growth
title_full_unstemmed The dynamic impact of government expenditure in education on economic growth
title_sort The dynamic impact of government expenditure in education on economic growth
publishDate 2021
container_title International Journal of Business and Society
container_volume 22
container_issue 3
doi_str_mv 10.33736/ijbs.4318.2021
url https://www.scopus.com/inward/record.uri?eid=2-s2.0-85121416894&doi=10.33736%2fijbs.4318.2021&partnerID=40&md5=6e8aec238c96ac35593992934c76ccd4
description The focal aim of this study is to examine the validation of education-led economic growth hypothesis in Malaysia under the recovery period following the 2008 world economic crisis. Specifically, this study implemented the augmented Cobb-Douglas model in order to observe the dynamic relationship between selected variables including, industrial production index, gross fixed capital formation, employment, government spending on education and broad money supply. This study adopted the Vector Error Correction Model (VECM) in analysing the dynamic impact between variables and generally supports the education-led growth hypothesis in the short and long run. Specifically the study corroborates the bidirectional causality between education spending and economic growth, and vice versa, in the short run. The result also reveals that long-run equilibrium relationship exists between government expenditure in education and economic growth in Malaysia during post-crisis recovery regime. The education-led growth hypothesis can thus be inferred for the economy following crisis. The government should thus be advised that increasing education sector spending should increase post-crisis economic growth in both the short and long run. This is further strengthened by Granger causality test result which suggests unidirectional causality that runs from financial variable to economic growth. It is accordingly suggested that financial variable is a determinant of government spending on education in the aftermath of the economic crisis. Additionally, the study also supports the role of capital and employment on economic growth in the long term. By implication, the study suggests that financial planning as related to national education policies must be carefully and meticulously crafted, to ensure future success. This is linked to the investment in human capital which includes education expenditure at different levels that is essentially important to national long-term planning. The specific financial planning for human capital development is therefore very important to ensure the expenditure incurred contributes to sustainable economic development in Malaysia in the long term. © 2021, Universiti Malaysia Sarawak. All rights reserved.
publisher Universiti Malaysia Sarawak
issn 15116670
language English
format Article
accesstype All Open Access; Gold Open Access
record_format scopus
collection Scopus
_version_ 1809678026806394880